Just months ago, Russian companies were buying up assets all over the world. Russian tycoons were boasting of vanity purchases like soccer clubs and racehorses. And President Dmitry Medvedev was talking about turning Moscow into a global financial center.

But amid a global financial crisis, Russia's stock market is nose-diving. Its politically connected oligarchs are losing hundreds of billions of dollars. And the Kremlin is scrambling to find a way to stop the bleeding.

These are nervous times for Russia Inc., and the old swagger is all but gone.

"There's less arrogance in the walk now," says Marshall Goldman, professor emeritus of Russian economics at Wellesley College and author of the book "Petrostate: Putin, Power, and the New Russia." "They have suddenly found out that they are vulnerable whereas before it was onward and upward. They had all these resources and now these resources have to be pledged and some of them disappeared."

The financial crisis has political ramifications everywhere. But in a country like Russia, where big business and the state are closely intertwined, the economy's precipitous nosedive is particularly volatile. Fears of higher unemployment are on the rise as the oligarchs who control the commanding heights of the economy shed jobs and cut costs. And inflation is ticking upward as the government pumps money into the financial sector to prevent a meltdown.

Moreover, the crisis has sparked speculation that the state will seek to take over large swaths of the economy. Observers expect the Kremlin to use the crisis to punish tycoons who have fallen out with the Kremlin and redistribute property. Many fear a behind-the-scenes battle over key assets.

"I think the state will be the winner from this crisis," says Olga Kryshtanovskaya, director of the Center for Elite Studies at the Russian Academy of Sciences Institute of Sociology. "The state has the resources to save those companies that it wishes to save. These will mostly be large state corporations and companies that are friendly to the Kremlin."

Market Meltdown

Russia's benchmark MICEX stock market has shed 61 percent of its value since May and the country's 25 wealthiest business moguls have lost an eye-popping $230 billion.

Russia's richest man, Oleg Deripaska, for example, has been forced to sell off stakes in the Canadian auto-parts maker Magna International and in the German construction giant Hochtief. Bank Soyuz, which he controls, stopped lending. And the GAZ automaker, in which he holds a majority stake, was forced to temporarily shut down its assembly lines.

Analysts say Russia's oligarchs, who had been borrowing large sums from foreign banks to finance their expansions, fell victim to the same credit crunch that has plagued businesses the world over.

This is a very good time to punish those whom the Kremlin thinks have stepped over the line and have not been sufficiently obedient

"What happened is that they used their wealth to borrow more money, putting up their wealth, their collateral, as security. When the collateral falls in value as the stocks have, they have to come up with more or their loans are called. And their loans have been called," Goldman says.

After reaching record highs in May, Russia's stock market had already been in decline when the global financial crisis hit in September.

A criminal investigation for alleged price fixing against the steel giant Mechel, seen by many as politically motivated, sent stocks tumbling in late July. And Russia's war with Georgia in early August drove down share prices further as foreign investors fled.

Strings Attached

Prime Minister Vladimir Putin's government has pledged more than $200 billion to prop up the banking and financial sectors, which will be distributed by the state-run Vneshekonombank.

But the aid comes with strings attached.

The first deputy chairman of Russia's Central Bank, Aleksei Ulyukayev, said on October 1 that Vneshekonombank would have the right to bar those receiving the funds from receiving other loans. Some analysts say this gives the state power to determine companies' key financial decisions.

Moreover, some business groups are already complaining that the process of distributing the funds has been opaque. In an open letter, Aleksandr Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, wrote that "the principle of providing state support to companies should be made public and transparent."

Most observers, however, expect the Kremlin to use the opportunity to reward its friends and discipline its foes. "This is a very good time to punish those whom the Kremlin thinks have stepped over the line and have not been sufficiently obedient," Kryshtanovskaya says.

According to Russian press reports, there is already evidence that the authorities are taking care of their own, and that well-connected companies and banks are taking advantage of the situation.

The daily "Kommersant" reported on October 17, for example, that the state-run oil giant Rosneft will get 47 percent of the $9 billion in loans earmarked for oil companies. Rosneft is chaired by Deputy Prime Minister Igor Sechin, a close ally of Putin's.

And Gazenergoprombank, a bank connected to the state-run natural-gas monopoly Gazprom, announced on October 15 that it would take over the troubled Moscow-based bank Sobinbank.

Mikhail Kasyanov, a former prime minister turned opposition figure, tells RFE/RL that he expects a major shake up in various sectors of the Russian economy, including telecommunications and metallurgy.

"The way resources are distributed to solve the crisis will of course be done in a way that redistributes property," Kasyanov says. "The authorities want to grab the remaining [major enterprises not under its control]. I can't rule out that in the near future we will see new owners of large Russian corporations."